We work hard to ensure that a Disney theme park and resort experience is imbued with the magic and quality that consumers around the globe expect from a Disney vacation. In fiscal 2005 at our domestic parks, our successful efforts in this regard drove increases in attendance, hotel occupancy and Guest spending, leading to gains in both revenue and operating profit for this segment². In fiscal 2005, we also continued to drive modest improvement in operating margins for our domestic theme park operations, which remains one of our most important priorities. As long as the travel and tourism market remains healthy, we continue to expect to drive margin improvement through a combination of higher volumes, higher asset utilization, productivity gains and vigilant cost control.

We believe that investing in our unparalleled portfolio of global theme park assets and consistently providing the outstanding Guest experience for which Disney is known will help ensure that we continue to enjoy a significant competitive advantage in this business, which will help us achieve our financial goals. Having completed a multi-year period of substantial reinvestment in our parks business, we are confident that we can deliver a superior Guest experience and improve financial performance while holding capital spending for our domestic operations to meaningfully under $1 billion per year. At the same time, we believe our theme parks segment will continue to deliver substantial levels of free cash flow, even after taking into account ongoing investment.

 

2 Under FIN 46R, a new accounting rule implemented in 2004, we began consolidating Euro Disney and Hong Kong Disneyland in The Walt Disney Company's financial statements, even though our effective ownership in Euro Disney and Hong Kong Disneyland is only 51% and 43%, respectively. Disney’s Parks and Resorts segment recognized gains in revenue and operating profit for the year both including and excluding this consolidation.

3 Our discussions and supporting charts regarding Disney's capital expenditures and free cash flow exclude the impact of consolidating Euro Disney and Hong Kong Disneyland for 2004 and 2005 (discussed previously in Footnote 2) in order to make those years comparable to prior periods. Free cash flow, and each of the measures excluding Euro Disney and Hong Kong Disneyland, are not financial measures defined by GAAP. Reconciliations of these non-GAAP financial measures to equivalent GAAP financial measures are available at the end of the Financial Review.